LONDON/FRANKFURT Oct 5 Deutsche Telekom
and United Internet are preparing rival
bids for German web hosting provider Host Europe Group (HEG)
ahead of an Oct. 10 deadline for non-binding offers, sources
involved in the process told Reuters.
HEG, one of Europe's largest independent web hosting firms,
was put up for sale by private equity firm Cinven
before the summer but the process was put on ice due to market
volatility resulting from Britain's vote to leave the EU.
Cinven has now resumed efforts to sell the web hosting firm,
which is valued at about 1.5 billion euros ($1.7 billion), the
sources said. It wants to receive indicative offers next week,
and is hoping to sign a deal before Christmas, they said.
Deutsche Telekom has teamed up with U.S. private equity fund
Hellman & Friedman while United Internet is working on a bid
with U.S. buyout fund Warburg Pincus, the sources said.
Web hosting firm GoDaddy Inc, owned by private
equity firms KKR and Silver Lake, is also considering a
bid for Host Europe which would help it gain scale in Europe,
one of the sources said.
Some buyout funds including Providence, Permira and EQT may
also decide to enter the bidding, the sources said.
Cinven, Deutsche Telekom, United Internet, GoDaddy, Warburg
Pincus, Providence, EQT and Permira declined to comment.
Bidders are expected to value HEG at about 10 or 11 times
its core earnings of 140 million euros, the sources said, giving
it a valuation of about 1.5 billion euros ($1.7 billion),
The business generates the bulk of its revenues from its
mass-market hosting services, one of the sources said, adding
that some of the bidders are less interested in its other unit,
known as "managed hosting", and would value this at a much lower
Deutsche Telekom plans to use its own web hosting subsidiary
Strato as a platform to launch a bid for HEG, the sources said.
Hellman & Friedman will retain a majority stake in the event of
a successful bid, and Strato will act as a minority investor,
one of the sources said.
United Internet, instead, wants to have a controlling stake
in HEG while its partner Warburg Pincus will be granted a
minority stake, the source said.
HEG manages websites and software in the cloud and supplies
domain name registration to business clients. It was founded
nearly two decades ago in Germany and has changed owners several
times since then.
Its peers in the mass market segment include U.S. rival
Endurance - partly backed by Warburg Pincus - as well
as GoDaddy. Application hosts range from Silicon
Valley's Rackspace up to industry giant Amazon Web
($1 = 0.8926 euros)
(Editing by Alexander Smith)